Bitunix Analyst:Markets Focus on NFP,but the Real Risk Lies in the Imbalance Between AI Valuations and Liquidity
BlockBeats News, June 5th. The Middle East situation has entered the final phase of US-Iran negotiations, but full risk resolution remains some distance away. Whether the topic is unfreezing Iranian assets, conditions for a Lebanon ceasefire, or the standoff between Israel and Hezbollah, all remain in the negotiation stage rather than full de-escalation. Geopolitical risk has not disappeared—markets have simply shifted short-term attention to tonight's US Non-Farm Payrolls and unemployment data.
The US economy is currently flashing contradictory signals. On one side, May corporate layoffs hit the highest level for that month since 2020, and initial jobless claims have risen to a high since February—indicating that some employers are turning more cautious on forward demand. On the other side, consensus still expects May NFP to print positive growth, with unemployment holding at 4.3%. This state of "cooling but not yet visibly deteriorating" labor market is exactly why San Francisco Fed President Daly has stressed that the Fed can neither promise rate cuts nor rule out further tightening.
But zooming out to the broader asset market, the truly important question is not interest rates—it is the extreme concentration of global capital in the AI growth narrative. From SpaceX launching its IPO roadshow to Anthropic publicly calling for a pause in frontier AI research, to global tech ETFs continuing to attract massive inflows, expectations for an AI-driven productivity revolution continue to escalate.At the same time, a deeply concerning pattern is emerging.
By current data, total US equity market cap stands at roughly $75–76 trillion, while M2 money supply is approximately $22.8 trillion. The resulting ratio of 316% is not only well above the ~150% level seen before the 2008 financial crisis—it has also surpassed the ~300% peak reached during the dot-com bubble in 2000. The implication: equity market cap is inflating far faster than the actual monetary base is growing.
More importantly, this market-cap expansion is highly concentrated in a handful of mega-cap tech names. NVIDIA, Microsoft, Apple, Alphabet, and Amazon—the principal AI beneficiaries—have continued to push index returns, creating a textbook capital-concentration effect. Since stock market cap can rise without corresponding cash inflows, paper wealth is now expanding much faster than real liquidity. Should large institutions begin taking profits in this environment, price volatility could be sharply amplified.
The global comparison underscores how extreme the US is. Japan's equivalent ratio sits at roughly 102%, while major European markets mostly fall between 50% and 90%—versus the US at over 300%. Global capital is rotating into US tech and AI at an unprecedented pace, pushing expectations for future growth to historical highs.
This is why tonight's NFP print matters far beyond the Fed's next policy move—it will test whether markets remain willing to accept the core assumption underwriting today's elevated valuations. If employment proves resilient, markets may continue to coexist with high valuations and high rates. But if labor data weakens while corporate earnings cannot live up to the AI investment vision, the future risk will no longer be a lack of liquidity—it will be the valuation pressure built up by over-reliance on a narrow set of growth narratives.
For crypto, this carries a similar signal. As global capital continues to crowd into AI and mega-cap tech, crypto assets will continue to compete with these high-growth names for capital allocation in the near term. But should markets begin to question the rationality of US equity valuations, the speed of rotation and risk repricing could be considerably faster than is currently anticipated.
